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3 questions to uncover KPIs you’re missing

If it feels like all eyes are on you, well, you’re probably right. Whether you’re at a major organization or a small business, stakeholders across all departments and levels look to the finance function for measures that will help them understand their future performance and set goals and strategies.

FP&A teams stuck using static planning processes tend to measure the same metrics that everyone else is measuring. That’s not only ineffective, it can be overwhelming, thanks to a deluge of data. More companies are now reaching beyond the financial data to identify and gauge KPIs. While nonfinancial metrics comprised just 10% of KPIs two years ago, CFOs expect that number to reach 30% on average by 2018, according to the Adaptive Insights CFO Indicator Report.

To shake free from the static planning shackles, finance leaders and business users must actively participate in the process: collaborating around business metrics and KPIs, gaining rapid insights with dashboards and reports based on trusted data, and using that information to inform plans and decision-making. Taking that active planning approach can mean the difference between passively watching KPIs that lag the real world and using real-time data to make nimble course corrections.

Not sure which KPIs your team might be overlooking? Consider these questions as a jumping-off point.

Who is the audience?

Just as there’s no one-size-fits-all list of KPIs to track, there’s no standard list of KPIs to share. Maybe the CFO wants to see both the variance and the underlying drivers of that variance. Maybe one budget manager wants to understand the booking and revenue forecasts, and another wants to drill into the granular difference by geography. Maybe the board of directors wants to understand not just how the company is performing but how it compares to peers in the industry.

Sharing meaningful data means sharing relevant data, and you have to understand your audience to uncover the KPIs they’ll care about. Take, for instance,Papyrus. The privately held retailer of green cards and gifts has more than 500 stores across North America. Seasonality is an understandable challenge for the company, and serving up a standard set of KPIs wouldn’t have delivered enough insight to internal stakeholders. Instead, the finance team uses a sophisticated, cloud-based dashboard to get greater visibility into how products skew revenue by season, and monitor key metrics like retail store performance, inventory, and payroll.

What is our strategy?

KPIs are a signal of performance, and that performance should be in the service of a larger strategy. When the University of Central Florida College of Medicine was experiencing exponential growth in enrollment, it had a great problem on its hands: how to keep the momentum going, while measuring the program’s success. The UCF finance team knew they had to track KPIs beyond the usual operating budget: Are students who enter the college graduating, for instance? How many are transferring to other institutions? And where do students get placed once they graduate? Those KPIs are critical for internal stakeholders, who need to course-correct where necessary and actively forecast for future positions and training needs. But they’re also essential for recruitment efforts, with eager prospects and their parents champing at the bit for data that shows the University of Central Florida is the right fit for them.

Finding the KPIs that will support and help drive the business strategy is all but impossible unless you understand what the strategy is. Where is the organization headed? What are its strategic goals? What are the pain points that need to be obliterated and the opportunities to embrace? Only with that road map in mind can the finance team find the metrics that will move the company in that direction.

How do we compare?

A KPI in isolation doesn’t tell you much—it must be considered in the context of both peer and industry averages, and the company’s own past performance and future goals. Executives at Thiess Mining, which runs one of the largest mining fleets in the world, wanted to move the needle on several operating metrics. But the finance team knew that didn’t mean setting static goals and hoping for the best. “We are a process control organization,” said Ben Willey, general manager of technology systems at Thiess. “We deliver value to our clients through optimizing resources and processes, so measuring key performance indicators is critical to our business performance.”

Thiess implemented Adaptive Insights to gain better visualization around the KPIs they track for every person, machine, activity, location, and consumable in the business. The impact was swift and impressive: In the first week, data gathered from the company’s fleet of trucks—compared with past performance—identified a mechanical problem that could have significantly slowed production. Instead, the fleet was fixed, and the company started achieving ROI within days of deployment.

FP&A teams know there’s no shortage of metrics to measure—especially as the parade of data and influx of nonfinancial KPIs march on. But modern finance leaders understand that a “more is more” approach will only dilute the very nature of KPIs.